NY Fed: Trump's tariffs were the main driver of consumer goods inflation in early 2026

Without President Donald Trump's tariffs, the prices of dozens of everyday consumer goods would have been falling. Instead, they rose by nearly 3 percentage points — and a new paper from the New York Federal Reserve says tariffs were the primary driver of that gap.

The study, published on the Fed's Liberty Street Economics blog, examined 67 categories of non-oil consumer goods and found that tariffs raised their collective price level by 2.9 percentage points as of February 2026. In the absence of those levies, prices for the same basket of goods would have declined by nearly 1%, the researchers estimated.

Goods price inflation was back near its slightly negative pre-COVID average for most of 2024 and began to edge up late that year, before the new tariffs were introduced. It then picked up through 2025. Our estimates attribute this increase to the tariffs.— Mary Amiti, Sebastian Heise, and David E. Weinstein, NY Fed researchers

The tariff-driven contribution to goods inflation peaked at around 3 percentage points in February 2026, according to the paper. Annual price growth in the tracked goods peaked at the start of 2026, but consumers are still expected to pay elevated prices into 2027 as a result of the policy, according to CNBC.

The researchers broke the price impact into two channels. Roughly two-thirds came directly from higher costs on imported consumer goods. The remaining third arose indirectly: U.S. producers who rely on imported parts and materials faced higher input costs, and — with foreign competition now more expensive — faced less pressure to hold their own prices down. The NY Fed calls this second force the 'strategic complementarity channel.'

Tariffs have a larger and more drawn-out impact on consumer prices than the direct effect alone would suggest.— Mary Amiti, Sebastian Heise, and David Weinstein, NY Fed researchers

The timing matters. Import prices respond almost immediately — the NY Fed found that nearly 90% of the 2025 tariffs passed through to U.S. import prices within the first month. Domestic producer prices, by contrast, take six to twelve months to adjust as higher costs move through supply chains. The full effect on consumer prices is not felt until roughly a year after a tariff is imposed.

The researchers also quantified the rule of thumb: for every percentage point increase in average tariffs, consumer goods prices rise by about a quarter of a percent after one year. They illustrated this with a scenario in which a 10% tariff is imposed on all imports, estimating that consumer goods prices would be 2.6% higher after twelve months.

The study also found that around 26% of last year's tariff increases ended up trickling into higher prices, according to CNBC — meaning companies absorbed some of the cost rather than passing all of it to shoppers, though the majority still reached consumers.

The Supreme Court struck down many of Trump's IEEPA tariffs in February 2026, resulting in billions of dollars in refunds to retailers, according to CNBC. The total impact of tariffs on goods prices is estimated to have fallen to zero by August 2026, roughly six months after that ruling, according to Business Insider. The White House has vowed to continue pursuing tariffs through alternative measures, and products from many countries now face levies of around 10% — significantly less than under the earlier round.

The study has important limits. It covers goods only — excluding services, which account for about two-thirds of the consumer basket, and excluding energy prices. It also cannot fully capture how tariffs may have affected broader economic factors such as exchange rates, wages, and consumer demand, which could amplify or offset the price pressures the researchers measured.

The White House pushed back on the findings. Spokesperson Taylor Rodgers said in statements to both CNBC and Business Insider that the administration's position is that foreign exporters — not American consumers — bear the cost of tariffs.

The nearly 20 trade deals negotiated by the President are protecting the US economy from unfair trade practices and leveling the playing field for American workers. The Trump administration has consistently maintained that the cost of tariffs will ultimately be borne by foreign exporters who rely on access to the American economy.— Taylor Rodgers, White House spokesperson

The NY Fed's own data complicate that claim: the paper found that foreign exporters lowered their prices very little, meaning nearly 90% of the 2025 tariffs passed through to U.S. import prices rather than being absorbed abroad.

Broader inflation, meanwhile, has been driven this year largely by energy prices amid the Iran war, according to Business Insider. Consumer price growth held steady at 3.4% year-over-year in August, with investors awaiting September's inflation report on October 14.

Why it matters — The NY Fed study provides the most rigorous quantified evidence to date that tariffs — not other economic forces — caused the rise in everyday goods prices Americans experienced in 2025 and early 2026, with effects that researchers say will linger into 2027.

Sources differ on Who bears the cost of tariffs — U.S. consumers or foreign exporters: Nearly 90% of tariff costs passed through to U.S. import prices; foreign exporters absorbed very little. (libertystreeteconomics.newyorkfed.org) vs The cost of tariffs will ultimately be borne by foreign exporters who rely on access to the American economy. (businessinsider.com (White House spokesperson Taylor Rodgers))

Reported by cnbc.com, libertystreeteconomics.newyorkfed.org, qz.com, businessinsider.com